Summary of Key Points
The photovoltaic (PV) industry's strategy of "reducing costs, expanding production, and gaining market share" over the past two decades has reached its limit. The entire sector is now incurring losses (15 major chain companies lost over 56 billion yuan last year), with new installations declining (a 51% decrease from January to April this year) and prices plummeting (silicon material prices have dropped from 300,000 yuan per ton to below 40,000 yuan). To turn the situation around, leading PV companies are shifting towards integrating PV with energy storage—combining the two technologies. Energy storage has become the new focus of the industry (6 energy storage pavilions compared to 4 PV pavilions at this year's SNEC exhibition). The reason energy storage can save PV is that it addresses the issue of unstable power generation and also generates profits (energy storage companies are performing well, with Sunpower's energy storage revenue increasing by 49%). Policy support has also played a role in this transition (by recognizing energy storage as a standalone profit-generating model). However, PV companies face technical barriers when entering the energy storage market, and there are concerns about potential overcapacity. Whether the energy storage industry will follow the same path as PV remains uncertain. Nevertheless, the integration of PV and energy storage is an irreversible trend, and companies are likely to evolve into comprehensive energy service providers.
Detailed Analysis
1. The PV Industry: From "Price War" to Profits Lost
For the past two decades, the PV industry's approach was to "sell more at lower prices"—companies competed by expanding production and reducing costs to capture market share. This strategy is no longer effective:
- Industry-wide losses: Last year, 15 major chain companies suffered net losses of over 56 billion yuan, with Tongwei losing 9.5 billion yuan, Longi 6.4 billion yuan, and Jinko 6.8 billion yuan; all five leading component manufacturers lost money in the first quarter of this year.
- Stagnant growth: New installations have declined (a 51% decrease from January to April), as investors are less willing to invest due to low profit expectations for PV projects.
- Price collapse: Silicon material prices have dropped from 300,000 yuan per ton in 2022 to below 40,000 yuan, and component prices have long been around 0.7 yuan per watt (up from over 1 yuan previously), resulting in greater losses for companies that sell more.
In the words of Zhong Gongshan, chairman of GCL, this is like "fighting in a muddy pit with no winners"—the old model of expanding production and reducing prices to gain market share has reached its physical limits, and a new approach is needed.
2. Why Energy Storage Has Become So Popular?
There are three main drivers for the rise of energy storage: policy support, demand, and profitability:
- Policy support: Previously, energy storage was mandatory (PV projects had to include energy storage, which was not profitable). However, Document No. 136 from 2025 abolished this requirement, allowing energy storage to generate revenue through peak shaving and frequency regulation services. Document No. 114 this year introduced a capacity-based pricing system, providing stable income sources for energy storage companies.
- Surging demand: New energy storage installations in China increased by 76% in the first quarter. Overseas, Europe faces energy shortages, while countries like Australia and Southeast Asia are rapidly developing this technology. AI data centers also have a growing demand for energy storage. Guojin Securities predicts a 62% increase in global energy storage installations this year.
- Profitability: While PV companies are struggling, energy storage companies are doing well. For example, Sunpower's energy storage revenue increased by 49%, and CATL's by 9%. The gross profit margin for energy storage products is 14.69%, compared to -1.42% for PV products.
3. PV Companies Entering the Energy Storage Market
PV companies have natural advantages when entering the energy storage market:
- Customer base: Both PV and energy storage target the same customers—power stations, commercial and industrial entities, and residential users, so existing sales networks can be utilized, saving costs.
- Technical challenges: Although PV and energy storage are related (both involve electricity), they belong to different fields (semiconductors vs. electrochemistry). PV companies need to learn new technologies, such as converting direct current to alternating current and managing battery systems.
- Longer supply chain: Energy storage involves multiple components and manufacturing processes, making it more complex than PV. Companies like CATL and Sunpower have extensive experience in this area.
However, there are significant challenges:
- High technical barriers: PV companies must overcome differences between the two technologies and learn new skills.
- Overcapacity concerns: The energy storage industry may face overcapacity, similar to what happened in the PV sector. Whether this will happen remains to be seen, but the integration of PV and energy storage is an irreversible trend.
4. Will Energy Storage Repeat PV's Mistakes?
There are concerns about potential overcapacity in the energy storage market:
- Price trends: Prices for lithium-ion energy storage systems are declining, indicating early signs of overproduction.
- Industry warnings: Experts warn that energy storage may experience similar issues to PV, with some suggesting that companies from different industries should avoid entering the sector. However, PV companies have a customer base and industry expertise, which could mitigate competition.
5. The Future of PV and Energy Storage
The integration of PV and energy storage is an irreversible trend:
- Blurred company boundaries: It's becoming difficult to distinguish between PV and energy storage companies. Companies like Longi are developing integrated solutions, while others are focusing on specific areas (e.g., AI-powered energy storage systems).
- Comprehensive service providers: Surviving companies will be those that offer a full range of services, from power generation to consumption, rather than just selling components or batteries.
Whether energy storage can save the PV industry is still uncertain, but it provides a new growth opportunity. Only companies that integrate PV and energy storage will thrive in the new energy market.